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Financial headwinds have prevented or delayed many millennials, people currently between the ages of 28 and 43, from achieving their homeownership dreams. From the 2007 financial crisis to rising student loan debt and the COVID-19 pandemic, millennials have faced significant hurdles—and perhaps some bad timing—when it comes to buying a home. As a result, the median age for first-time home buyers has reached an all-time high of 38, according to the National Association of Realtors’ 2024 Profile of Home Buyers and Sellers.
The latest data from the U.S. Census Bureau shows that younger millennials, aged 28 to 34, have a homeownership rate of 37%. In comparison older millennials, aged 35 to 43, have a much higher homeownership rate of 62.3%. This is a stark difference from Gen X and Baby Boomers, who have homeownership rates above 69%, with those aged 70 to 74 having the highest rate at 80.7%.
They say with age comes wisdom, but also wealth. Now that most millennials are over 30, the average millennial’s wealth is growing, opening up new opportunities for homeownership. So, where are the best and most challenging places for millennials to buy a home?
Zoocasa used data from Apartment List to analyze millennial homeownership rates, comparing the top ten cities with the highest rates to the bottom ten. This analysis also examined median home prices, price growth, household income, and average mortgage payments in each city to help millennials find an ideal place to call home.
The Most Millennial-Friendly Cities for Homeownership
The cities with the highest rates of millennial homeownership share several favorable home-buying conditions: median home prices are below the national median, average monthly mortgage payments are at or under $2,000, the difference between monthly rent and monthly mortgage payments is small, and home price growth is less volatile compared to cities with lower millennial homeownership rates.
Among metropolitan areas with populations of 1 million or greater, Minneapolis and Grand Rapids have the highest millennial homeownership rates at 53%. The relatively affordable median home prices—both over $20,000 below the national median of $422,100—and strong median household incomes above $70,000 are likely factors boosting homeownership rates.
The next four metros with the highest millennial homeownership rates are all located in the Midwest: Cincinnati, Louisville, Indianapolis, and St. Louis. Among these four, Louisville and St. Louis stand out for having median home prices below $300,000, giving younger millennials, who have had less time to build wealth, a better chance at saving for a down payment. Though median household incomes are lower in Louisville and St. Louis, at $61,488 and $56,245, respectively, homebuyers benefit from the low average monthly mortgage payments, both under $1,500.
For millennials in the Northeast, Pittsburgh may be the best option for buying a home. The millennial homeownership rate is 50%, and the median household income is $66,219. But the big draw of Pittsburgh is its affordability, with the lowest median home price on our list at $236,100. Pittsburgh is also the only city on our list where the median asking rent is higher than the average monthly mortgage payment, suggesting that buying a home is more affordable than renting.
Salt Lake City is an outlier among the metros with high millennial homeownership rates. Its median home price is $161,000 above the national median, with a year-over-year increase of 7%—the highest growth rate among the top ten most millennial-friendly cities. The gap between the median asking rent and the average monthly mortgage payment is $1,500. However, this hasn’t stopped people from moving to Salt Lake City, where the population increased by 0.9% from July 2022 to July 2023.
Where Millennials Aren't Buying: 10 Cities with the Fewest Young Homeowners
It’s no surprise that metros with the highest home prices also have the lowest millennial homeownership rates. San Jose, for instance, has the country’s highest median home price at just over $2 million, resulting in a low millennial homeownership rate of 24%—half the rate in Kansas City.
The difference between rent prices and monthly mortgage payments is also much more drastic in cities with low millennial homeownership rates than in cities with high ones. The transition from renting to buying will be particularly challenging in these cities, as renters will face mortgage payments that are several thousand dollars higher each month compared to their previous rent.
In Cincinnati, for instance, renters who become buyers only need to spend an extra $258 a month on their mortgage, while renters in Los Angeles need an extra $1,646 each month as an owner.
But it’s not only high home prices that are keeping the millennial homeownership rate low in some cities. Orlando and Fresno both have median home prices just slightly above the national median price and yet their millennial homeownership rates are still low at 35% and 31% respectively.
One explanation could be that income growth has not kept pace with rising homeownership costs. A recent Zoocasa study found that Orlando’s median annual income increased by 30.1% from 2018 to 2023, while the average monthly mortgage payment increased by 98.9% during the same period. Similarly, in Fresno, the median annual income increased by 29.5% in five years, while the average monthly mortgage payment rose by 83.9%. In cities with already above-median home prices, the rapid increase in mortgage costs will be felt even more acutely.
Looking Beyond Big Cities? Millennial-Friendly Small-to-Midsize Metros to Consider
While many millennials may be drawn to the convenience and excitement of living in or near a large metropolitan area, there’s still an appeal to living in a smaller city, namely affordability. Five of the ten metros with populations under 1 million and the highest millennial homeownership rates have median home prices below $300,000.
Bismarck, ND, has the highest millennial homeownership rate among metros analyzed by Apartment List at 68%, followed by Monroe, MI; Dover, DE; and Greeley, CO, all at 59%. Except for Greeley, all have median home prices below the national median, suggesting that affordability drives high millennial homeownership rates.
Muncie, IN has the lowest median home price of all analyzed metros, with a median home price of $165,000. This results in an average monthly mortgage payment of just $853. Springfield, IL is similarly affordable, with a median home price of $186,600 and an average monthly mortgage payment of $965.
Do you have questions about entering one of these markets this year? Give us a call! Our experienced real estate agents will help you navigate the market to find the right home for you.
The post Millennial Magnet Cities: Where Young Homeowners Are Taking Root appeared first on Zoocasa Blog.
